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Ryanair could lose as much as ¬60 million ($126.6 million) this year with Europe's largest budget airline warning it will be forced to cut fares despite the soaring cost of jet fuel.
Chief executive Michael O'Leary yesterday revealed the damage already wreaked by the surging oil price, admitting that profits in the first quarter were 85 per cent down on the three months to the end of June 2007.
He warned that much worse was to come unless oil prices fell dramatically, with the airline now expecting to break even at best over the full year, with the worst-case scenario being losses of ¬60 million.
Ryanair has taken some steps to reduce its exposure to further rises in the price of oil, having hedged 90 per cent of its needs in the third quarter at US$124 a barrel, but has no hedges in place for the fourth quarter.
To add to its woes, it also expects to have to cut fares 5 per cent in the course of the year to persuade passengers to fly with it. It had previously hoped to increase its prices 5 per cent.
Profit margins are down to 3 per cent compared with the 20 per cent on which Ryanair has been used to operating. Its profit in the first quarter was just ¬21 million, compared with ¬139 million last year.
Ryanair has managed to increase passenger numbers in the past three months - up 19 per cent to 15 million. O'Leary said he still expected passenger numbers to grow this year, though he has trimmed a forecast of a 16 per cent rise to 60 million to a 14 per cent increase to 58 million.
- INDEPENDENT
